SoftBank has announced an unexpected loss of 477.6 billion yen ($3.3 billion) for the first quarter (Q1) spanning April to June. This unexpected financial outcome has taken market analysts by surprise, given the substantial investment gains from the company’s tech-focused Vision Fund.
The Vision Fund, which serves as SoftBank’s vehicle for investing in high-growth technology enterprises, posted a notable profit of $1.1 billion during the June quarter, according to reports from CNBC. This positive performance contrasted with the overall loss reported by SoftBank.
A significant factor impacting SoftBank’s financials was the company’s ongoing efforts to reduce its stake in Alibaba, a move aimed at recovering from the technology stock downturn witnessed last year. This maneuver resulted in an unrealized valuation loss exceeding $3.8 billion for Alibaba shares. However, SoftBank managed to offset this loss through a derivative gain of more than $5.3 billion.
The company’s financial statement also highlighted the fair value of its listed portfolio companies, which grew to $25.4 billion at the close of the June quarter, marking an increase from the previous valuation of $24.9 billion as of March 31. In tandem, the fair value of SoftBank’s private portfolio companies, constituting the majority of its investments, climbed to $61.3 billion as of June 30, up from $60.5 billion the preceding quarter.
The previous quarter, ending in March 2023, saw SoftBank grappling with a record $32 billion loss at its Vision Fund, a consequence of the ongoing funding challenges against the backdrop of global macroeconomic conditions.
As the valuation of tech startups continues to experience downward pressure, the Vision Fund sector endured a $32 billion loss for its fiscal year. In its earnings report, SoftBank noted, “The fair value of a wide range of private portfolio companies also decreased, reflecting markdowns of weaker-performing companies and share price declines among market comparable companies.”
Further analysis revealed that both SoftBank Vision Fund 1 and Vision Fund 2 initiated new and follow-on investments, including those facilitated through share exchanges, amounting to $3.14 billion for the fiscal year. This figure represented a substantial reduction compared to the previous fiscal year’s $44.26 billion.
The unexpected Q1 loss casts a spotlight on the intricate challenges and dynamics faced by SoftBank, a key player in global investment, as it navigates the evolving landscape of technology investments amidst shifting market forces.